Get These Dividend Stocks on Your Watchlist

If you're like most investors right now, you're probably paying close attention to dividend stocks. Their combination of current income and growth potential has never been more attractive, especially as the two-year-old bull market ages and risk-averse investors get increasingly nervous about a potential correction.

The best dividend stocks not only pay a healthy percentage of their stock price to shareholders but also raise the amount they pay regularly. To stay ahead of the curve, it's helpful to track the dividend stocks that are most likely to reward investors before they make moves to increase their payouts.

An easy trend to track
Fortunately, that's not as difficult to do as you might think. Plenty of companies have long streaks of paying more in dividends year in and year out, and typically, they do their darndest to keep those streaks alive. When you look closely at them, you'll notice that many of them tend to raise their dividends at the same time of year. It's not a sure thing -- J.M. Smucker (NYSE: SJM  ) , for instance, surprised investors by breaking its tradition and raising its dividend early this year, marking its 12th consecutive increase. But because less observant investors tend to greet even the predictable dividend increases with enthusiasm, getting your eyes on them beforehand gives you on edge.

For instance, if you like dividend stocks, you've probably heard of the Dividend Aristocrats. Just in case you haven't, though, the stock research company Standard and Poor's gathers up a list of stocks that have raised their dividend payouts to shareholders 25 or more years in a row. All it takes is a single blemish to throw a stock off the list, so as you'd expect, there aren't a huge number of Dividend Aristocrats.

Dividend Aristocrats are worth watching for a variety of reasons. Perhaps most importantly, in order to achieve a 25-year streak of higher dividends, a company must learn how to succeed in good times and bad. As we saw during the financial crisis, many financial companies that had strong track records of paying dividends had to stop raising their payouts, or even cut their dividend payments, to preserve cash.

So who's up next?
Several Dividend Aristocrats are due to raise their dividends within the next month or so. The granddaddy of the bunch is Procter & Gamble (NYSE: PG  ) , which has a 54-year streak of higher dividends. Many investors consider the company a good defensive play during economic recessions and periods of slow growth, but the consumer-products giant has actually booked year-over-year earnings declines during each of the past four quarters. But with a payout ratio of just 51%, P&G still has more than enough room to continue its winning ways.

Another company to look forward to is Johnson & Johnson (NYSE: JNJ  ) , with a 48-year streak on the line. The company has faced plenty of challenges over the past year, including a glut of product recalls across its medical-device, pharmaceutical, and consumer-products divisions. Again, though, a 44% payout ratio should eliminate any concerns that even a temporary hit from bad publicity could endanger the dividend.

Finally among the Aristocrats, Air Products and Chemicals (NYSE: APD  ) looks to extend its streak to 29 years. The gas producer has seen earnings on the rise as the industrial sector starts to ramp up from the recent recession.

Aristocrat wannabes
Even outside the list, there are some stocks you shouldn't miss out on. H.B. Fuller (NYSE: FUL  ) isn't on the S&P's official list, but it has raised its dividends for more than four decades, and it hopes to extend that streak soon. In addition, TJX (NYSE: TJX  ) and Tanger Factory Outlet (NYSE: SKT  ) don't have long enough histories of higher dividends to be Aristocrats yet, but they also are in line to see higher dividends in the months ahead. TJX has actually already announced its intention to raise its dividend; it merely seeks to formalize that in April.

As the market meltdown reminded us, nothing in investing is certain. But given the incentive that companies have to keep their dividend-increase streaks alive, looking at the timing that companies have historically used to announce higher dividends is the closest thing to a sure thing you're likely to find.

So don't miss out on these companies' next dividend hikes. You can use our free watchlist feature to stay up to speed on these stocks and get all the news you need to be a more successful investor. Simply click here to get started today.

Johnson & Johnson and Procter & Gamble are Motley Fool Income Investor recommendations. Motley Fool Options has recommended a diagonal call position on Johnson & Johnson, which is also a Motley Fool Inside Value recommendation. The Fool and Motley Fool Alpha own shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Dan Caplinger loves looking for extra money. He doesn't own shares of the companies mentioned in this article. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy will pay dividends forever.


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